Fuel prices to drop Rs7-17 per litre if govt maintains taxes

ISLAMABAD: Despite an impact of 11 per cent depreciation in the rupee’s value, the prices of all petroleum products are estimated to go down by Rs7 to 17 per litre on Friday, provided the government maintains existing tax rates in line with relaxations secured from the International Monetary Fund (IMF).

Based on prevailing tax rates, ex-depot, per-litre price of petrol has been estimated to go down by Rs7.25, that of high-speed diesel (HSD) by Rs16.65, kerosene by Rs14.20, and light diesel oil (LDO) by Rs10.80.

The reduction is, however, subject to change in two key factors — if the government allows an increase in commission to oil marketing companies or scales up the petroleum development levy. Finance Minister Ishaq Dar already had a word with the IMF mission chief on Thursday to reduce the burden on the economy and protect the vulnerable.

Under the IMF programme, the government is required to raise the petroleum development levy by Rs5 per month for both petrol and high-speed diesel until it reaches Rs50 in January for petrol and April for diesel.

Oil marketing companies urge govt to honour its commitment on fuel margins

During the recent visit of Prime Minister Shehbaz Sharif to Washington and his meeting with IMF’s top management, the government secured a relaxation to freeze the levy and fuel cost on electricity bills for three months in the face of flood-induced devastation. The Fund’s management, however, linked its approval through the directors of the IMF’s executive board.

On Thursday, Mr Dar held a virtual meeting with IMF Mission Chief to Pakistan Nathan Porter and exchanged notes on the economic situation caused by the devastating floods that affected infrastructure, crops and citizens’ livelihood.

The finance minister told Mr Porter that “the government would take measures to reduce the burden on the economy while protecting the vulnerable sections of the population” and promised to address structural issues so that Pakistan is able to end its fiscal deficit and move towards sustainable growth.

Mr Dar also recalled the meeting between Prime Minister Sharif and IMF’s Managing Director Kristalina Georgieva in which the latter “vowed to support Pakistan in this difficult situation caused by the flash floods and reconsider the programme conditions”.

Mr Porter “expressed IMF’s support for Pakistan in this hour of need” and also mentioned Ms Georgieva’s meeting with Mr Sharif, an official statement said, adding that the finance minister thanked Mr Porter for IMF’s support at a difficult time for the global economy.

At present, the GST on four key petroleum products — petrol, HSD, kerosene and LDO — is zero against the normal rate of 17pc.

The government is, however, charging a per-litre petroleum levy of Rs37.50 on petrol, Rs7.50 on HSD, Rs10 each on kerosene and LDO, and Rs30 on high-octane blending component (HOBC). Besides, the government is charging about Rs22 per litre customs duty on petrol and HSD.

On the other hand, the oil marketing companies have asked the prime minister to honour a government commitment to increase their per-litre margins from Rs3.68 to Rs6.

The commitment was made on Aug 2 at a meeting presided over by the Special Adviser to Prime Minister and Energy Task Force Chairman Shahid Khaqan Abbasi. It was attended by the petroleum secretary, the Oil and Gas Regulatory Authority chairman and representatives of the oil marketing companies. Under the commitment, the increase should have taken place with effect from Sept 1.

The new government started raising fuel prices from the last week of May to fulfil IMF conditions for resuming a bailout package. The price hike has been the main issue between Pakistan and the lender as part of an agreement to withdraw subsidies in oil and power sectors to reduce the fiscal deficit.

Ousted prime minister Imran Khan had given the subsidy in his last days in power to cool down public sentiments in the face of double-digit inflation, a move the IMF said deviated from the terms of the 2019 deal.

Published in Dawn, September 30th, 2022